Tony Abbott
’s response was characteristically clever: “You buy a company car, you pay the company car tax; you put your money in bank, you pay the bank tax; you light up, you pay the cigarette tax. A little over three weeks, three new taxes."

But in the transition from economic policy statement to political one-liner, some important detail was lost.

The proposed “three new taxes" are in fact the removal of a hole in the income tax base that has permitted unwarranted tax concessions to middle- and high-income earners, a charge for valuable taxpayer-provided deposit insurance and a tax that will deter thousands of young Australians from taking up smoking.

Thanks to the Treasury and Department of Finance bureaucrats, the politicians’ urge to grab more revenue has been channelled into three quite worthwhile revenue measures.

The statutory formula for calculating fringe benefits tax on cars assumes that only 20 per cent of the car’s use is for private travel. This amounts to a generous concession for people who can take their income as a private car benefit.

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This concession has been defended as an important subsidy to Australia’s car manufacturers. But if the government insists on propping up Australia’s uneconomic car makers, it should subsidise them directly. There is no reason why the taxpayer also should subsidise the demand for foreign luxury cars.

Bank deposit tax actually insurance

The so-called tax on bank deposits is really an insurance premium for the deposit guarantee provided by taxpayers. The government introduced a deposit guarantee as an emergency measure during the global financial crisis.

So far, the cost of providing this deposit insurance has been borne by the taxpayer, which gives the banks and other authorised deposit-takers an artificial competitive advantage.

For the Bank for International Settlements in Switzerland, a core principle of deposit insurance is that “primary responsibility for paying the cost of deposit insurance should be borne by banks, since they and their clients directly benefit from having an effective deposit insurance system".

As it is, the taxpayer still will be the insurer of last resort.

This, by the way, may not be the end of the deposit insurance story. For one thing, the current $250,000 deposit guarantee is too high. At nearly four times annual per capita gross domestic product, it is twice the level regarded as appropriate by the International Monetary Fund, which argues that high levels of insurance weaken the market pressure on banks to keep to keep out of trouble.

Moreover, the flat fee will grate with the major banks and, perhaps, the people appointed to run the scheme.

Ideally, the insurance premium should reflect the risk which, in general, is higher for small banks than for big ones.

A flat premium gives the small banks an artificial competitive edge. Deposit insurance schemes overseas often have started with flat fees and gradually moved to risk-determined fees after giving the weaker banks time to prepare for the change. But that would increase the pressure for mergers.

People smoke less when it costs more

The third “new tax" is an increase in excise on tobacco products.

When the price of cigarettes goes up, people smoke less. They don't smoke a lot less, which is why governments can count on raising more money.

But while established smokers are not easily deterred by increases in the prices of cigarettes, the American evidence is that young people – especially those who are in the processes of deciding whether to take up smoking – are much more price-sensitive than adult smokers.

One US study found that an increase in the price of cigarettes produced a more than proportionate drop in the number of teenagers taking up smoking.

If that is the case in Australia, the increase in tobacco tax will be unusually effective in deterring teenagers from taking up smoking – more effective, perhaps, than the ban on cigarette promotional packaging.

If the effect of the restrictions on packaging is undermined by the tobacco companies cutting their real prices, the argument for increasing the tobacco excise will be even greater.